TMI Blog2015 (11) TMI 921X X X X Extracts X X X X X X X X Extracts X X X X ..... r: The present appeal has been preferred by the assessee against the order dated 25.03.2010 of the Commissioner of Income Tax [hereinafter referred to as the CIT] relevant to assessment year 2005-06, passed under section 263 of the Act whereby he has annulled the assessment made u/s 143(3) of the Act by the Assessing Officer (hereinafter referred to as the AO) and has directed the AO for denovo assessment in the case of the assessee. 2. The facts in brief are that the Ld. CIT exercising his revisional jurisdiction under section 263 called for and examined the assessment records and was of the view that the order of the AO was erroneous in so far as it was prejudicial to the interest of Revenue on the following grounds: (1) Purchase of tools and implements of ₹ 62,44,802/-, which was in the nature of capital expenditure, was debited in the prof it loss account as revenue expenditure and same was allowed by the Assessing Officer without any verification. (2) Assessee had claimed depredation on dies at the rate of 40% and same was allowed by the Assessing Officer in assessment without any examination, although the depreciation allowable as per the I. T. Rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ues. He observed that on proper verification, certain claims of the assessee may be found allowable or disallowable either in part or full. But if such verification has not been made at the time of assessment, such assessment is liable to be treated as erroneous in so far as it is prejudicial to the interest of Revenue. The AO should have given a specific finding as to whether the particular claim of the assessee was allowable or disallowable. However, no such finding was given by the AO. He, therefore, concluded that the claim of the assessee has not been allowed after proper verification. He, therefore, treated the assessment made by the AO as erroneous in so far as it was prejudicial to the interest of Revenue. He accordingly set aside the assessment with a direction to do it denovo. Being aggrieved by the order of the Ld. CIT, the assessee has come in appeal before us. 5. We have heard the rival contentions and have also gone through the records. To arrive at the correct conclusion of the case, we deem it necessary to reproduce the relevant provisions of section 263 of the Act. Section 263(1) in The Income- Tax Act: (1) The Commissioner may call for and examine th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oreign agency commission, freight outward, tools and implements, machinery repairs, tour abroad etc. 4. Details in respect of business promotion. 5. Capital account of partners 6. Details of bank accounts held with account numbers and their respective balances 7. Photocopies of bills to be furnished in respect of addition to fixed assets 8. Details of expenses like telephone expenses with telephone numbers and place of installation. 9. Complete Details of sundry debtors and creditors with name, address and amount. 10. Details of other major heads of expenses. 11. Details of TDS outstanding with gross amount and date of payment in treasury. 12. Copy of bank account to be furnished with bank reconciliation statement. 8. The assessee submitted the required details including ledger account of tools and implements and copies of bills etc. The Ld. A.R. of the assessee has further invited our attention to copies of the various other letters addressed to the AO to show that from time to time the AO called for various records which were duly submitted and the relevant explanation was given to the AO. After duly examining the record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee not only explained about each and every claim/query but also produced the necessary details, charts etc. justifying his claim in this respect. The Ld. CIT has also mentioned in the impugned order that the assessee had given the explanation regarding the items of claim disputed by the Ld. CIT. 10. As per the provisions of section 263 as enumerated above, after getting the explanation from the assessee, the Ld. CIT was supposed to examine the contention of the assessee. Before passing an order of modifying, enhancing or cancelling the assessment, he was supposed either to himself make or cause to make such an enquiry as he deems necessary. The words as he deems necessary , in our view, do not mean that the Ld. CIT is left with a choice either to make or not to make an enquiry. As per the relevant provisions of section 263, it was incumbent upon the Ld. CIT to make or cause to make an enquiry. So far as the words as he deems necessary are concerned, the said words suggest that the enquiries which are necessary to form a view as to whether the order of the AO is erroneous and prejudicial to the interest of Revenue or not? A perusal of the above reproduced queries numb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordance with any order or direction or instruction issued by CBDT, that shall be deemed to be erroneous in so far as its prejudicial to the interest of Revenue. The said deeming provisions, in our view, are not applicable for the assessment year under consideration. 12. In our view, when the assessee shows from the record that the necessary enquiries were made by the AO and the AO had applied his mind and the view adopted by him was one of the possible views, then it cannot be said that the order of the AO is erroneous. 13. In the case in hand, after getting the necessary details and explanation from the assessee, the Ld. CIT has not given his opinion regarding the validity or genuineness of the claims made by the assessee. He has simply opined that the AO had not made the necessary enquires. He has neither asked the assessee to show as to what enquiries were made by the AO nor himself has looked into the explanations submitted by the assessee. 14. Now coming to the various case laws relied upon by both the parties. 15. The Ld. D.R. has relied upon the following authorities to stress the point that if the Commissioner finds that there was a lack of enquiry on the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tz (I) Ltd. 2014 361 ITR 505 (Delhi HC) 18. We have heard the rival contentions and have also gone through the the relevant case laws submitted by the Ld. Representatives of the parties. Firstly, we discuss the case laws relied upon by the Ld. D.R. There is no doubt that the Hon ble Karnataka High Court in the case of Infosys Technology (supra) has held that where the AO has not made it explicit as to the entitlement of a claim of the assessee, the Commissioner has the jurisdiction in directing the AO to make enquiries in the matter and give a specific finding in this respect. Further, in the case of Maithan International (supra) the Hon ble Calcutta High Court has held that where it was established on record that credits shown by the assessee were based on loan from parties who were not possessed of sufficient means and the AO had not made sufficient enquiries regarding the creditworthiness of the parties then the Commissioner was justified in exercising his power under section 263 and directing the AO to make enquiries about the creditworthiness of the parties. In the case of Manmohak Properties (P.) Ltd. (supra), the Mumbai Tribunal has held that the absence or lac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulfillment of these twin conditions that the Commissioner may pass an order exercising powers of revision, the assessee must be called for, his explanation sought for and examination by the Commissioner and thereafter if the Commissioner still feels that the order is erroneous and prejudicial to the interest of the Revenue then he may pass the revisional orders. The Hon ble Bombay High Court in the case of Gabriel India Ltd. (supra) has held that the Commissioner cannot initiate proceedings with a view to starting fishing and rowing enquiries in matters or orders which are already concluded. There must be material on record to show that tax which was lawfully exigible has not been imposed if the claim was allowed by the Income Tax Officer (ITO). On being satisfied with the explanation of the assessee, such decision of the ITO cannot be held to be erroneous simply because in his order he did not make an elaborate discussion in that record. The Hon ble Bombay High Court observed in the said case that when the CIT himself , even after initiating proceedings for revision and hearing the assesse, could not say that the allowance of the claim of the assessee was erroneous, ..he si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ews permissible in law, then the order cannot be treated as erroneous or prejudicial to the interest of Revenue, unless the view taken by the ITO is unsustainable in law. On the other hand, the Ld. D.R. has stressed upon the finding of the Hon ble Supreme Court that where the AO had accepted entry in the statement of account filed by the assessee in the absence of any supporting material without making any enquiry, exercise of jurisdiction by Commissioner under section 263(1) of the Act was justified. The facts before the Hon ble Supreme Court were that the assessee company entered into an agreement for sale of estate of rubber plantation. The sale consideration was agreed to be paid in installments. The purchaser could not adhere to the schedule and on his request the parties agreed to the extension of time for payment of the installments on condition of vendee paying compensation/damage for loss of agricultural income and other liabilities. Accordingly, the purchaser paid the damages to the assessee company. In the return filed, the assessee company claimed the said compensation and damages received as agricultural income. The AO accepted the same. The Commissioner, however, exer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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